/Unlocking Massive Growth with the Triple Gain Framework

Unlocking Massive Growth with the Triple Gain Framework
Apr 8, 2024 6 min read

Unlocking Massive Growth with the Triple Gain Framework

Dillon Carter
Dillon Carter
Co-Founder, COO at Aura

I went back to college to get a degree in finance after having started my Amazon business.

To many, that's the opposite of what's promoted online. You see more students leaving college after starting their businesses. I knew there was something more to business that I wanted to understand.

Sure, only two of my professors ever owned companies, but that's not what was important to me. Many students tend to fixate on if their professors ever owned businesses or not.

What was important to me was learning the foundations of things like finance. The critical components that make up every kind of business you could imagine.

One class helped me double my Amazon business. That class was Managerial Accounting.

Sexy, I know...

Developing the Triple Gain Framework

I can't stand accounting or bookkeeping to be honest. But, accounting and finance are like making math profitable. A few equations can change everything.

I'm a big fan of exponential growth in business. It's why I write so much on topics like reverse engineering and making 50,000 unit decisions. It's a mindset shift that makes you an exponential founder.

I've spent countless hours in class and reading books to develop three strategies:

  1. The Halving Technique
  2. The Netting Technique
  3. The Fixed Technique

I'll cover each of these in detail, but they are all rooted in simple knowledge that anyone can apply.

The Halving Technique

This technique is so simple it's laughable—carry less inventory.

Yes, you read that right. This is mainly tailored for wholesale-based sellers as that's my background. Although, it can be applied to any of the selling models.

This is where our Managerial Accounting comes into play...

Let's say you have $10,000 in capital to spend on inventory each month. You have two options:

  • Spend 100% of it within one week for a month's worth of inventory
  • Spend 100% of it for a half month's worth of inventory

As odd as it may sound, the second option gives you more profit.

Here's how that works:

  1. You spend $10,000 and make a 20% ROI in the first two weeks of the month, which gives you a $2,000 profit so far
  2. You spend the original $10,000 + the $2,000 profit for another 20% ROI in the last two weeks, giving you an additional $2,400 in profit

This means that option one would have given you $2,000 in profit for the month while option two gives you $4,400. That's right, you doubled your profit for the month using the same amount of original capital.

See how things like math and accounting are useful in business?

I've left out the best part too—this continues to compound every month.

The Netting Technique

What if you could double or triple your capital overnight. Would you?

Most sellers complain about not having enough access to capital. That's not actually the case, the issue is in how they are thinking about capital. Capital can be in many different forms. One of my favorites is called leverage: other people's money.

One of these forms of capital leverage is called net terms.

If you consistently spend $10,000 a month with a specific supplier, ask for net terms (net 30, 60, 90, etc.). Essentially, the supplier is allowing you to receive the inventory and pay for it 30, 60, or 90 days later. Net terms are incredible for managing cash flow.

This is paired perfectly with The Halving Technique above as well. You're able to "purchase" inventory and sell it before the invoice is due. Imagine what that could mean for your growth rate?

In fact, your capital assets now consist of true cash in the bank plus any lines like net terms with your suppliers. This is how you're able to go from spending $10,000 a month on inventory to $100,000+ overnight.

A word of caution though. Just like trading stocks with options this could go wrong if you're not purchasing good inventory.

The Fixed Technique

I'm a massive fan of things like Prep Centers that allow you to pay based on a variable like units. It keeps the total cost low but the tradeoff is that the per unit is typically higher.

When you're building a business it's important to focus on variable costs like using a prep center. This approach helps you keep the total costs down in the early days. In fact, many of the fixed costs things like warehouses have a minimum monthly cost.

If the variable cost option is half of the fixed, that's what you should consider.

This is great but eventually your variable costs will outpace any fixed costs. The moment that happens you should consider switching to fixed.

For example, if warehouses + labor would cost me $5,000 per month and a prep center is charging me $1 per unit, I would need to be selling more than 5,000 units before the fixed cost (the warehouse) made sense.

Too many sellers jump into a warehouse before it makes financial sense.

To sum this up, start variable but transition to fixed when the math checks out.

Wrapping it up

These techniques aren't just strategies; they are new ways of thinking. Whether it's holding less inventory, leveraging net terms, or switching from variable to fixed costs. It all comes down to one thing—understanding the numbers.

Just like a few equations can turn math into profit, a few strategic moves can make your business exponential.

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